Deductible vs. Co-pay
Two of the most common words associated with health insurance are deductible and copay. A deductible is the amount an insurance holder has to pay out of pocket for medical services before the insurance begins to cover expenses at a higher level, while a copay is a fee charged at the time of the medical service. The deductible usually resets every year, while the copay is charged regardless of whether the deductible is met or not.
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Deductible Basics
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A deductible is out-of-pocket funds spent by the insurance holder for medical services. For example, if the deductible on your insurance plan is $1,500, you have to pay costs up to that amount in addition to your copays and monthly premium to your medical providers each year. Once you have accumulated the amount of bills equivalent to your deductible, your insurance begins to pay your bills at a higher rate. With some insurance policies, this may be the full amount billed or may be a percentage of what is owed, depending upon the terms of your plan.
Copay Basics
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A copay is an amount due each time you visit a doctor or receive a prescription. The amount can vary based upon the type of doctor or medication prescribed. The amount is listed in your insurance policy’s basic paperwork and should not change for a 12-month period of the insurance policy. It can be raised at the renewal of the policy, typically at the end of a calendar or fiscal year.
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Ways to Change Your Deductible
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The deductible is typically in proportion to your monthly premium, or bill. The higher the monthly bill, the lower the deductible and vice versa. Many who are in good health and most likely will not visit the doctor often choose a plan with a high deductible to get a lower monthly rate. It is important to note that if medical bills do arise, those with high deductibles may have to pay out significant amounts of money in an emergency situation.
How to Budget for Medical Expenses
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Medical expenses can be quite variable for many. For example, a healthy adult may only get sick once a year for several years, but then be in a car accident the next and accumulate several thousand dollars in bills. It may help to have a savings fund equivalent to the amount of your insurance’s deductible to be ready in the event of an emergency. Additionally, pad the account with the average copay spent in the previous year to have a fund ready in the event of a medical situation.
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References
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